Boom or gloom? Examining the Dutch disease in a two-speed economy

Hilde Bjørnland () and Leif Thorsrud
Authors registered in the RePEc Author Service: Hilde Christiane Bjørnland ()

No No 6/2013, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

Abstract: Traditional studies of the Dutch disease do not typically account for productivity spillovers between the booming energy sector and non-oil sectors. This study identifes and quantifes these spillovers using a Bayesian Dynamic Factor Model (BDFM). The model allows for resource movements and spending effects through a large panel of variables at the sectoral level, while also identifying disturbances to the real oil price, global demand and non-oil activity. Using Norway as a representative case study, we find that a booming energy sector has substantial spillover effects on the non-oil sectors. Furthermore, windfall gains due to changes in the real oil price also stimulates the economy, but primarily if the oil price increase is caused by global demand. Oil price increases due to, say, supply disruptions, while stimulating activity in the technologically intense service sectors and boosting government spending, have small spillover effects on the rest of the economy, primarily because of reduced cost competitiveness. Yet, there is no evidence of Dutch disease. Instead, we find evidence of a two-speed economy, with non-tradables growing at a much faster pace than tradables. Our results suggest that traditional Dutch disease models with a fixed capital stock and exogenous labor supply do not provide a convincing explanation for how petroleum wealth affects a resource rich economy when there are productivity spillovers between sectors.

Keywords: Resource boom; oil prices; Dutch disease; learning by doing; two-speed economy; Bayesian Dynamic Factor Model (BDFM) (search for similar items in EconPapers)
JEL-codes: C32 E32 F41 Q33 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2013-08
New Economics Papers: this item is included in nep-ene and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.bi.edu/globalassets/forskning/camp/wor ... king_camp_6-2013.pdf (application/pdf)

Related works:
Working Paper: Boom or gloom? Examining the Dutch disease in a two-speed economy (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bny:wpaper:0015

Access Statistics for this paper

More papers in Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School Contact information at EDIRC.
Bibliographic data for series maintained by Helene Olsen ().